Auto layoffs boost jobless claims

By IBT Staff Reporter On 05/14/09 AT 9:16 AM

The number of U.S. workers filing new claims for jobless benefits rose more than expected last week, government data showed on Thursday, pushed up by auto plant shutdowns related to Chrysler's bankruptcy.

Initial claims for state unemployment insurance benefits increased 32,000 to a seasonally adjusted 637,000 in the week ended May 9, the Labor Department said, reversing an easing trend of the previous two weeks.

A Labor Department official said a good part of the increase is due to automotive states and claims.

The data, coming on the heels of a report showing a consumers were still reluctant to go out and shop, was another set back an economy trapped in recession since December 2007.

I'm afraid a little Round-Up has been sprayed on the green shoots of the recovery, said Lee Olver, fixed income strategist at SMH Capital in Houston, Texas.

U.S. stock index futures extended losses and U.S. government debt prices extended gains after the surprisingly weak jobless claims data. The dollar fell against the yen.

Chrysler filed for bankruptcy on April 30 to help it reorganize and shut its 30 plants starting May 1.

The job pace of job losses had shown signs of losing momentum in recent weeks and nonfarm payrolls dropped by 539,000 in April, the least amount since October, government data showed last week.

High unemployment is a drag on incomes, restraining consumption by households and stalling the economy's recovery.

The government said on Wednesday that retail sales fell 0.4 percent last month, a second straight monthly decline that tempered hopes the economy would soon pull out of its downturn.

WAL-MART PROFITS FLAT

On Thursday, Wal-Mart Stores Inc reported that its profits were flat in the quarter ended April 30 as it managed to attract shoppers with its low prices.

Wal-Mart CEO Mike Dunn said the company, the world's largest retailer, would remain cautiously optimistic on the timetable for an economic recovery as long as unemployment was rising.

The Labor Department said the number of people staying on the benefit rolls after collecting an initial week of aid jumped 202,000 to a record high of 6.56 million in the week ended May 2, the latest week for which the data is available.

This was the 15th straight week that so-called continued claims touched a record high. The insured unemployment rate climbed to 4.9 percent, the highest since December 1982, from 4.8 percent the previous week.

The four-week moving average for new claims, considered to be a better gauge of underlying trends as it smoothes out week-to-week volatility, rose 6,000 to 630,500 last week from 624,500. This measure had declined for four straight weeks.

PRODUCER PRICES UP

In another report, the Labor Department said prices received by U.S. producers rose at a brisk pace in April, driven by a surge in food costs.

The Producer Price Index climbed 0.3 percent after declining 1.2 percent in March. Food prices rose 1.5 percent in April, the biggest increase since January 2008. Food costs rose on a record jump in egg prices, along with soaring prices for vegetables and meat.

Excluding food, the headline PPI would have increased 0.1 percent. However, compared to the same period last year, prices received by producers tumbled 3.7 percent, the biggest decline since January 1950, keeping the risk of deflation alive.